business ethics and corporate trust roger boltonbrian moriarty apco worldwidebusiness roundtable...

BUSINESS ETHICS AND CORPORATE TRUST

Roger Bolton Brian MoriartyAPCO Worldwide Business Roundtable

Institute for Corporate Ethics

Tuck Symposium on CommunicationNew York CityJune 2, 2009

AGENDA Brief Overview of our organizations and why we are engaged in

public trust in business

Defining Business Ethics

Defining Trust

Three Core Dynamics of Trust

Recommendations

What’s Next

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BUSINESS ETHICS

The Dynamics Of Public Trust In Business – Emerging Opportunities

For Leaders

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BUSINESS ETHICS

Is it defined by scandals?

Is it defined by value creation?

Is it relevant to both?

Is Business Ethics an Oxymoron or Pleonasm?

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BUSINESS ETHICS

The idea of “business” as “cowboy capitalism,” that capitalism works because people are completely self-interested, and will only act for others if they have the proper incentives is outmoded and shopworn.

Business is a form of social cooperation, working together to create value that no one person could create on his or her own.– This idea of business is not new—it is at least as old as Aristotle

Ed Freeman: “Business is about creating value for stakeholders”.– At a minimum stakeholders are customers, employees, suppliers,

communities, as well as shareholders or other financiers.

“Business”

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BUSINESS ETHICS

Too often we think about “ethics” as about deciding who the saints and sinners.

Ethics is about the most important parts of our lives, our core values and must be center stage—especially in turbulent times.

Ethics is about how we get along with each other, how our values and interest interact.

Ethics always works at two levels: personal and interpersonal.

“Ethics”

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BUSINESS ETHICS

An survey from 2006 reports that:

– 81% agree the first priority for any corporation is to make a profit so they can stay in business

– 88% agree the first priority for any corporation is to be a good corporate citizen by acting in socially responsible ways

– 91% agree it is possible for companies to find a balance between making a profit and giving back to society –

Source: American Management Association, The Ethical Enterprise: Doing the Right Thing in the Right Ways, Today and Tomorrow, A Global Study of Business Ethics, 2006, p. 2

A Paradox or a Positive Sign?

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BUSINESS ETHICS

Creating value for customers.

Managing suppliers so that they want to make your business better.

Managing employees so that they show up and use their brains.

Being good citizens in the community.

Making money for financiers.

Stakeholder interests have to go together over time. All have to win.

Putting Ethics At The Center: The Basics

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BUSINESS ETHICS

Trust Panelist: “The values and culture of our company compels us almost to do things not expected or required.”

Ethics and values give us anchors, stakes in the ground.

They serve as stabilizers and shields.

They empower and inspire us. They lead to everyone pulling in the same direction.

In short, values and ethics can drive business strategy.

Putting Ethics At The Center: The Basics

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BUSINESS ETHICS

Value Creation: How does the firm make others better off? – Trust Panelist: “The question we need to ask is why does the world need

this enterprise.”

Stakeholder Cooperation: What values and directives help build commitment to the firm?

Stakeholder/Societal Expectations: Do our values and commitments obey social norms and laws?

Putting Ethics At The Center: Vision and Values

BUSINESS ETHICS

Corporate communicators:

Have expertise in engaging stakeholders

Understand the uses and implications of emerging technologies and trends

Have a clear set of professional values – Arthur W. Page Society Principles

– Authentic Enterprise Reports

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Corporate Communications & Ethics

DEFINING TRUST


For Leaders

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DEFINING TRUST

1. Fidelity – Consists of caring, respect, advocacy and avoiding conflicts of interest

2. Competence – Avoiding mistakes and producing the best achievable results

3. Honesty – Entails telling the truth and avoiding intentional falsehoods

4. Confidentiality – The protection and proper use of sensitive or private information

5. Global Trust – A catchall, but also a significant component that is irreducible or not subject to dissection—what one might call the “soul of trust”

Source: Mark A. Hall, Elizabeth Dugan, Beiyao Zheng, and Aneil K. Mishra, “Trust in Physicians and Medical Institutions: What Is It, Can It Be Measured, Does It Matter?,” The Milbank Quarterly, Vol. 79, No. 4, 2001)

Dimensions of Trust

DEFINING TRUST

How do you think business scores on competence?

How do you think business scores on goodwill?

The news is better than you might think

A Harris Interactive survey reported that: 63% of the general public trusts that “most companies have good intentions and work hard not to repeat similar mistakes again.”

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Competence and Goodwill

DEFINING TRUST

•Interpersonal

•Organizational

•Inter-organizational

•Institutional

•Public

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The Trust Arena is Complex

DEFINING TRUST

Public trust in business is the level and type of vulnerability that the public is willing to assume with regard to business relations. It is a critical ingredient for social cooperation and market efficiency and a cause for deep concern when it is absent or threatened.

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Public Trust in Business

DEFINING TRUST

Trust Panelist: “No one ever talks about public trust in the boardroom—we talk about customer loyalty and the Fortune 500 survey of the ‘Most Admired Companies’—things that seem more closely related to our company.”

What does public trust have to do with your company?

Annual cost of compliance with regulations post Sarbanes-Oxley estimated to be $1.1 trillion, more than 10% of the GDP

January 2009, The Conference Board Consumer Confidence IndexTM reaches all-time-low of 37.7.

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Does Public Trust Matter?

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Trust improves the efficiency of transactions

Trust within firms impacts employee performance.

Trust among firms impacts customer acquisition and retention.

Trust among the business units of large firms impacts innovation.

WHY TRUST MATTERS

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WHY TRUST MATTERS

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U.S. Trust in Institutions How much do you trust each institution to do what’s right? Source: Edelman Trust Barometer

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30

40

50

60

70

Business

Gov't

WHY TRUST MATTERS

THE THREE CORE DYNAMICS OF TRUST


For Leaders

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THE THREE CORE DYNAMICS

Mutuality

Balance of Power

Trust Safeguards

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Mutuality

• Based upon shared values or interests

• Create value for multiple stakeholders

• Concern for societal values and interests

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Balance of Power

• Risks and opportunities are shared

• Mediating institutions have influence

• Authentic dialogue occurs between parties

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Trust Safeguards

• Legal compliance mechanisms

• Create protection for stakeholders

• Reparations are required for violations

REPORT RECOMMENDATIONS


For Leaders


To help business leaders make better decisions by:Exploring the unchartered territory of public trust in business

Offering business leaders actionable recommendations, including opportunities to build public trust in their companies, industries and in the institution of business

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Goal of the Project on Public Trust in Business

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Ensure that values are adhered to consistently across your enterprise.

Build and manage strong relationships with mediating institutions.

Embrace transparency.

Work to build trust in your business sector.

Focus on the core contribution that the firm makes to society.

THE VALUE OF VALUES


For Leaders

Stakeholder Empowerment

Globalization

DigitalNetwork

Revolution

THE VALUE OF VALUES

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Implications for enterprises:

Threats … Influential new stakeholders Demands for transparency Risks to brand and reputation Regulatory activism

THE VALUE OF VALUES

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Imperative for enterprises:

The enterprise must be grounded in a sure sense of what defines and differentiates it (mission, values, principles, beliefs).

And those definitions must dictate consistent behavior and actions.

THE VALUE OF VALUES

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THE VALUE OF VALUES

Our Credo

We believe our first responsibility is to the doctors, nurses and patients,

to mothers and fathers and all others who use our products and services.

In meeting their needs everything we do must be of high quality.

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THE VALUE OF VALUES

STAKEHOLDER RELATIONSHIPS


For Leaders

Stakeholder Empowerment

Globalization

DigitalNetwork

Revolution


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How do you build relationships with disparate stakeholders?

Authentic dialogue Free consulting Look for common ground Be willing to change


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Aetna in the 90s Put customers and shareholders first Strong form managed care

Anti Managed Care Backlash Physicians, patients rebelled Government mandates

New CEO - A Doctor New values – The Aetna Way Balance the needs of ALL constituents New approaches Settle lawsuit


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The New York TimesMay 23, 2003


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“The once notoriously stingy and fiercely unpopular company is now frequently cast as the country's most physician-friendly insurer.”

BusinessWeek, Jan. 4, 2006By Jessi Hempel and Diane Brady


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Engage in meaningful dialogue with responsible mediating institutions that have legitimate interests and influence traditional stakeholders

Create partnerships with groups that can enhance your value-creating activities


EMBRACE TRANSPARENCY


For Leaders

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Transparency leads to:

– better understanding of a firm’s good intentions

– more informed engagement with mediating organizations and other stakeholders.


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Web 2.0

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108 million blogs, increasing by 175,000 daily

Nearly one billion camera phones worldwide

Second Life – 14 million people, 80 countries

YouTube – 100 million videos/day


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Personal experiences with company’s employees 2 1 1 1 2 1 1 1.3

Analysts or professional organization opinions 1 2 3 2 1 2 2 1.9

Opinions of colleagues, peers, or friends 3 3 2 3 5 4 3 3.3

What companies are doing for others in your industry 6 8 4 7 4 3 6 5.4

Company websites 5 6 5 8 3 5 10 6.0

White papers, research, or case studies 4 4 6 4 7 9 8 6.0

Articles in magazines or newspapers 7 9 10 9 8 6 4 7.6

Online sources, not directly from the company 10 7 7 6 9 8 7 7.7

Tradeshows, conferences, industry forums, events 8 5 9 5 6 10 11 7.7

Influence Source Brazil Ger Spain Italy India Sing JapanAverage

Rank

News stories on TV or radio 11 11 12 12 10 7 5 9.7

Advertising 9 10 11 10 11 11 9 10.1

Direct marketing (e-mail or mail) 12 12 8 11 12 12 12 11.3

Biggest Influence on Opinion about IBM


IBM Survey of executives in seven countries

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We continue to advocate IBMers' responsible involvement today in this new, rapidly growing space of relationship, learning and collaboration.

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Be willing to disclose meaningful, nonproprietary information about the firm’s business, policy and lobbying practices

Embrace the notion that transparency leads to: – better understanding of a firm’s good intentions

– more informed engagement with mediating organizations and other stakeholders.


BUILD TRUST IN YOUR SECTOR


For Leaders

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These percentages of employees, by industry believe that if the misconduct they observed in their companies became publicly known, the organization could “significantly lose public trust”

Source: KPMG Forensic, Organizational Integrity Survey 2008-2009, p. 2.

Employee Trust by Industry

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(Source: Harris Interactive News Release, “More Regulation for Banks,” December 8, 2008)

Sector Generally Trust More Regulation

BankingOilPharmaceuticalHealth InsuranceComputer HardwareComputer SoftwareSupermarkets

21 % (-14)4%10%7%17%16%30%

36% (+16)53%49%49%5%6%6%

Public Trust by Industry

Trust in one organization can effect trust in another related group

The Halo Effect Respects No Borders: “A strong correlation has been shown between trust in physicians and trust in insurers although it is unclear whose ‘halo’ is shining upon whom.” (Hall et al, 2001)

The positive side of contagion

Partnering have positive impact

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Source: Mark A. Hall, Elizabeth Dugan, Beiyao Zheng, and Aneil K. Mishra, “Trust in Physicians and Medical Institutions: What Is It, Can It Be Measured, Does It Matter?,” The Milbank Quarterly, Vol. 79, No. 4, 2001)

THE HALO EFFECT


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DII Signatory Companies are united in their commitments to adopt and implement the highest standards of business ethics and conduct. Not a lobbying organization, DII seeks to promote and nurture a culture of ethical conduct within every company in the defense industry.


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Develops Industry Standards Regarding:

•Environmental Issues •Fair Labor•Manufacturing and Safety

FOCUS ON THE CORE CONTRIBUTION THE FIRM

MAKES TO SOCIETY


For Leaders

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View societal trends as business opportunities connected to the core value-creating purpose of the firm

Being socially responsible is not about offsetting negative impacts, but about taking actions that are good for business because they create value for a broad spectrum of stakeholders

FOCUS ON CORE CONTRIBUTION


Aetna Chairman’s Initiatives

• Genetic testing

• Disparities in health care

• Care at the end of life

• Depression management

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GE Imagination

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IBM – A Smarter Planet

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http://www.ibm.com/ibm/ideasfromibm/us/smartplanet/index.shtml


The MBA Oath

“As a manager, my purpose is to serve the greater good by bringing people and resources together to create value that no single individual can build alone.”

“I will safeguard the interests of my shareholders, co-workers, customers, and the society in which we operate.”

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Ensure that all managers understand how the core contribution of the firm to society creates trust in the firm

Create social value in the public interest through the firm’s core contribution to society

Align business objectives with the public interest


NEXT STEPS


For Leaders

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NEXT STEPS

•How does public trust in business impact my firm or my sector?•Which trust configurations matter most to my firm or my sector?•How does public trust in business impact how regulators think about business?•What drivers are most likely to affect trust in my company with respect to various stakeholders?•What business outcomes are connected to various types of trust or distrust and to the actionsof mediating institutions?

Filling the Knowledge Gap

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NEXT STEPS

• Organize a high-level working group of experts representing major stakeholders to develop principles for effective financial markets regulation.

• Conduct a series of research studies.

• Promote dialogue between thought leaders to advancegame-changing solutions with regard to practice and policy.

• Assemble leading academics in the area of trust to begin filling the knowledge gap, delivering actionable knowledge to executives (Fall 2009).

• Devote increased attention to public trust in our ongoing work.

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NEXT STEPS

•What questions do you feel research should address?

•What else should we be doing?

Your Suggestions?

BUSINESS ETHICS AND CORPORATE TRUST

Roger Bolton Brian MoriartyAPCO Worldwide Business Roundtable

Institute for Corporate Ethics

Tuck Symposium on CommunicationNew York CityJune 2, 2009

business ethics and corporate trust roger boltonbrian moriarty apco worldwidebusiness roundtable...

Documents

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